Royal Dutch Shell has abandoned its written agreements to significantly reduce greenhouse gas (GHG) pollution at its Jackpine Mine and Muskeg River Mine Expansion oilsands projects. The commitments, made to the Oilsands Environmental Coalition (OSEC), helped inform the decision by the governments of Alberta and Canada to grant regulatory approval for the projects in 2004 and 2006, respectively.

“We have a long track record of actively working with oilsands companies, government and other stakeholders to address the environmental impacts of oilsands development,” said Marlo Raynolds, Executive Director of the Pembina Institute. “Shell’s decision to break these binding agreements calls into question its claims of environmental leadership. Shell seems to believe it can break promises to Canadians with impunity.”

Breaking its negotiated agreement to reduce GHG emissions from these projects is a significant step backwards for Shell, a company that has sought recognition as a leader in the oilsands for its approach to climate change.

Prior to the approval of both projects, Shell had committed to setting GHG pollution reduction targets in 2007 “to reduce emissions to better than the most likely commercial alternative on a full-cycle basis.” Without these commitments, Shell’s GHG pollution from these projects will increase by an estimated 900,000 tonnes, which is equivalent to adding 200,000 cars to the road in Canada.

“Shell has built its reputation in Canada by promising to address the environmental and social concerns of stakeholders and communities. Dropping its commitment raises the question of whether these types of promises are driven by ethics or tactics,” said Simon Dyer, Oilsands Program Director at the Pembina Institute. “Shell’s betrayal of both stakeholders and the governments that approved these projects will undoubtedly reinforce the growing mistrust that Canadians have of the oilsands industry, especially on environmental matters.”

In approving Shell’s projects, the Joint Review Panel struck by the Alberta Energy Resources Conservation Board (ERCB) and the Government of Canada explicitly noted that they would review Shell’s approval in the event that the company failed to fulfill commitments that had been presented as evidence. On behalf of OSEC, today the Pembina Institute and Ecojustice filed an affidavit with the ERCB and the Government of Canada requesting that the approval of these projects be re-considered through a new public hearing.

“The Joint Review Panels were presented with these commitments as evidence, and it informed their decision. That evidence no longer reflects reality,” said Barry Robinson, a staff lawyer with Ecojustice who will represent OSEC. “We are confident that the ERCB and the Government of Canada will stand by their word and re-evaluate these projects in light of this new evidence by promptly convening public hearings.”

Backgrounder: Questions & Answers

1. Who is the Oilsands Environmental Coalition?

The Oilsands Environmental Coalition (OSEC) is comprised of Alberta-based environmental organizations concerned about the cumulative and project-specific environmental and socioeconomic impacts of oilsands development. Its members include the Pembina Institute, Toxics Watch Society of Alberta and the Fort McMurray Environmental Association. OSEC members have been engaged in reviewing and assessing oilsands development since the mid-1980s and have provided evidence and/or submissions to the Alberta Energy Resources Conservation Board (ERCB) and Alberta/federal Joint Review Panels.

2. What were Shell’s climate change commitments to OSEC for the Jackpine Mine and Muskeg River Mine Expansion?

OSEC and Shell reached bilateral agreements in 2003 and 2006, respectively, that included commitments to reduce greenhouse gas (GHG) pollution from the Jackpine Mine and Muskeg River Mine Expansion oilsands projects. Shell now refers to these projects collectively as “Expansion 1.”

For the Jackpine Mine project Shell committed that, at a minimum, it would reduce emissions to better than the most likely commercial alternative (to producing oil from oilsands) on a full cycle basis. A process for establishing the specific target is set out in the agreement with an expected completion date of the second quarter of 2006.

For the Muskeg River Mine Expansion, Shell similarly committed to setting an emission reduction target or goal for new facilities (on a full cycle basis) that is better than the most likely commercial supply alternative at start-up, with a GHG commitment and management plan to be established by 2007.

In written correspondence and face-to-face meetings, Shell has indicated that it does not intend to quantify a reduction target; rather it intends to comply with future federal GHG regulatory requirements as outlined in the Turning the Corner climate change plan. Shell believes that compliance with these regulations will result in sufficient GHG reductions to meet the “spirit” of the commitments to OSEC.

However, not only do these regulations not yet exist, but also their future is uncertain because the Government of Canada is reviewing its approach in light of developments on climate change and GHG regulations in the United States. Furthermore, based on our analysis, even if Shell were to comply with the reduction requirements envisioned in Turning the Corner, the GHG intensity of these projects would remain higher than the “most likely commercial alternative” and therefore Shell would fail to fulfill its commitments to OSEC.

3. How environmentally significant were these climate change commitments?

By reducing greenhouse gas emissions associated with Expansion 1 to a level consistent with the most likely commercial alternative, as per the commitments, OSEC estimates that Shell would avoid emitting approximately 900,000 tonnes of CO2 each year. This is equivalent to the annual greenhouse gas pollution from 200,000 cars.

OSEC has taken a proactive and cooperative approach to minimizing and mitigating project-specific environmental impacts by engaging in negotiations with proponents of oilsands projects to improve environmental performance. These negotiations occur after a proponent has filed its application and environmental impact assessment, but prior to ERCB or Joint Review Panel public hearings.

When successful, these negotiations lead to bilateral agreements that include specific commitments for improved environmental performance. These written agreements are submitted as evidence at public hearings to inform the ERCB and/or Joint Review Panel’s public interest decision.

For those issues that are not successfully addressed through a bilateral agreement, OSEC presents evidence at ERCB or Joint Review Panel hearings and makes recommendations for approval conditions and/or recommends that the project be denied approval.

Government decision-makers have advocated this approach in order to minimize the scope, duration and conflict associated with public hearings. It is also commonly used by First Nations and Métis stakeholders in the oilsands region.

5. In light of Shell’s decision to break these commitments, what is OSEC’s recourse?

OSEC has gone to significant lengths to resolve this matter bilaterally with Shell through written correspondence and face-to-face meetings between November 2007 and January 2009. Despite these efforts, Shell has made it clear that it does not intend to fulfill the commitments.

“The Joint Panel believes that when a company makes commitments of this nature, it has satisfied itself that these activities will benefit the Project, the stakeholders, and the public, and the Joint Panel takes these commitments into account when arriving at its decision.”

EUB Decision 2006-128, p. 90

In the decision reports for both the Jackpine Mine and the Muskeg River Mine Expansion, the respective Joint Review Panels clearly stated that they expect Shell to adhere to all commitments made during the consultation process, in the application and at the public hearing. In addition, the Joint Review Panels noted that Shell should advise the EUB (now the ERCB) if, for whatever reason, it could not fulfill a commitment. In the event that Shell failed to fulfill a commitment, the Joint Review Panels indicated that the affected parties have the right to request a review of the original approval.

OSEC is now exercising this right by requesting that the ERCB and the Government of Canada reconvene Joint Panel public hearings to re-evaluate the approvals it granted Shell for these projects.

In light of Shell's decision to break these commitments, the responsibility to uphold the integrity of the regulatory decision-making process rests with the ERCB and the Government of Canada.